Workout & Consulting Services
New Paradigm Development Partners, LLC (“NPDP”) provides innovative consulting services which has proven to both preserve assets for borrowers and increase financial recovery for financial institutions. Through negotiation and consensus building, NPDP has compromised or restructured more than $1 billion in commercial debt involving both commercial and residential distressed real estate assets. Notably, NPDP is trained and certified to serve as a neutral facilitator in an informal or court ordered mediation. Also NPDP can lay claim to a rare niche of experience in the troubled hospitality industry, having served as a consultant for institutional and private equity funds as well as private and publicly traded hotel entities. NPDP can also provide, where applicable, fee based asset, development and construction process management.
The NPDP Resolution Process builds a foundation for consensus upon the three R’s:
1. Reorganization: Underwriting and Data Assimilation of the Borrower / Guarantor Assets
2. Restructuring: Development of the Borrower’s Operations
3. Recapitalization: Modification and Repositioning of the Borrower’s Indebtedness
Task 1: Reorganization of the Situation
It is paramount from the outset that the lenders and the borrowers not view a distressed loan through only the narrow prism of the particular asset(s). The parties are most often stuck in what the deal “was” rather than what its current or expected realities “are”. The starting point for our services is a thorough underwriting of not only the real estate and the assets of the borrower / guarantor, but the complete picture of the financial challenges inherent in their situation. The analysis of this data, juxtaposed against market conditions, creates a common understanding about the entirety of the situation. From here the parties can have a reality based dialogue from which to formulate a workout plan. Therefore, as Task 1 we assimilate and compile all the necessary data, details and related documentation for all to understand
Task 2: Restructuring: Creating Better Alternatives Within a Workout Plan
The major benefit derived from completing Task 1 is that it allows for an integrity based assessment of possible available alternatives to allow the parties to achieve a Resolution. Every situation generally has a hard boundary alternative from a legal point of view which we call “Door Number One”. For instance the lender may choose to foreclose and pursue the remedies while the borrower can perhaps file bankruptcy. But rarely have we seen the legal rights solution as being optimal for either party in today’s chaotic realities of real estate. The challenge for both parties is to view the situation as a New Paradigm where strategic permutations of the assets can lead to better mutual outcomes. The NPDP Resolution Process seeks to create a “Door Number Two” where both parties reach consensus on a better alternative path or paths
Task 3: Recapitalization: Finding a Solution
Every workout plan can employ one or all of the following approaches:
1. Fresh Capital / Collateral – The generation of what is effectively new capital or collateral is often a defining element of a successful overall restructuring program. NPDP has standing relationships with both public / private investors which it can draw upon, in select circumstances, to arrange for the disposition or refinance of all or a portion of the distressed asset. NPDP also has experience in unconventional techniques such as debtor in possession financing (D.I.P.) and / or participating second mortgages and mezzanine facilities.
2. Negotiated Workout, Maintenance and Forbearance Agreements – More often than not, it is NPDP’s creativity working within the confines of the real estate and the borrower which leads to a Resolution. This may result in an innovative utilization of the economics inherent in the real estate. Or it may involve NPDP’s ability to construct a creative realignment of the borrower’s existing portfolio of assets. And where the borrower is involved in a multiplicity of debtor situations, as is most often the case, NPDP will devise a step by step plan for the Overall Resolution.
3. Organization of Liquidating Trusts – In certain situations, due to the complexities or dynamics of the assets, it simply may be impossible for the parties to realize any acceptable recovery / resolution in the short run. In these circumstances, NPDP will advocate for the formation of a liquidating trust (“LQ”) whereby assets are transferred into a longer term joint venture entity made up of one or more class of creditor(s) and the borrower. In the LQ, priority positions of the creditors are established in a fashion similar to a chapter 11 plan but a provision is also made for the debtor as an incentive to maximize recovery. The trust would make allowances for the cost of interim management and maintenance according to the guidelines of a settlement agreement negotiated by NPDP. By acting in much the same capacity as a receiver, NPDP can also manage the eventual disposition of the assets. The goals of a liquidating trust are 1) intermediate preservation 2) optimal liquidation and 3) enhanced recovery for all.
